Tesla Inc, the world’s most valuable automaker, has faced challenges in the first quarter of 2023 as it reduced prices to attract more customers amid rising competition and economic instability.

To boost sales, Tesla cut prices on its vehicles five times from January to April, which increased the number of quarterly sales but caused the company’s profit margin to decline.

17 analysts polled by Visible Alpha anticipate that Tesla will report an auto gross margin of 23.2% for the quarter on Wednesday, down from the record 32.9% reported in the same period in 2022 and the lowest since the fourth quarter of 2019.

In January, Finance Chief Zachary Kirkhorn promised that Tesla would not fall below margins of 20% and an average selling price of $47,000 across all its models. However, analysts predict further price cuts and margin pressure.

Bernstein analysts, in a note, said that while many investors have hoped that Q1 margins might have reached their bottom, they do not believe that to be the case, especially given the expectation of further cuts.

Tesla has faced stiff competition from rival Ford Motor Co at home, while consumers have cut back on spending due to recession concerns. In China, Tesla’s second-largest market, the company has lagged behind BYD, adding to the pressure.

On Monday, employees at Tesla’s Shanghai factory were informed that the company planned to cut their performance bonuses, which are tied to the factory’s performance. This led to some online posts and protests from workers.

Tesla CEO, billionaire Elon Musk, has said that an increase in production at its factories in Austin, Texas, and Berlin would help improve margins due to economies of scale.

The company is also expected to benefit from a drop in lithium prices this year, mainly in China, where a slump in demand for electric vehicles has left stocks of the metal piling up.

George Gianarikas, an analyst at Canaccord Genuity, said, “It’s probable that Tesla’s margins will be preserved based on the reduction in commodity costs.”

Tesla has set a target to deliver 1.8 million vehicles this year, although Musk said in January that the company could deliver 2 million vehicles if circumstances were favorable.

Tesla’s shares have gained about 50% this year after losing 65% of their value last year.